Is a Gift From an Employer Taxable Income?
Gifts from an employer may be considered taxable income if they meet a few specific qualities. Find out if a gift from an employer is taxable income with help from a certified financial planner TM professional with over a decade of experience in wealth management in this free video clip.
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Hi, I'm Samantha Fraelich, and I'm a Certified Financial Planner Professional. I'm here today to talk about whether a gift from your employer counts as taxable income. We've all heard the saying don't look at gifts towards an amount. But, if that gifts is coming from your employer, beware that there maybe taxes involved. The IRS publication 525 is a document that discusses about whether a gift from your employer is considered taxable income. What that document states in plain English is basically that if your employer gives you a turkey, a ham or another item of nominal value, you do not need to include that as taxable income for that year. The reason that the IRS cares about whether a gift from your employer is taxable or not is because employers have to pay what's called a payroll tax on any income that they pay to an employee. If they give you large sums of gifts at the end of each year or even cash or gift certificates, they avoid paying that payroll tax. So, the IRS is always very cautious about monitoring gifts and what employers are actually giving to their employees. The more tangible the gift from your employer is and the less likely it is that you can easily convert that into cash, the less likely it is that the IRS would have an issue with that gift. However, if your employer hands you cash or a gift certificate or any other item that can very easily be turned into cash, that's when the IRS starts to wonder whether that's a taxable gift. So, if you're going to get an annual bonus from employer, maybe you want that in turkeys or hams. Again, I'm Samantha Fraelich, and I hope this gives you a little bit more clarity when annual bonus time comes around about whether you have additional income to report for that year.